Netherlands: Van Oord finishes 2015 with record profits amid difficult market conditions

Revenue and profit

The year 2015 was an extraordinarily good one for Van Oord. The company achieved a record revenue of EUR 2.579 billion (2014: EUR 2.104 billion), an increase of 23%, and a record profit of EUR 169 million (2014: EUR 119 million). These figures are attributable to the successful execution of several major projects, including construction of the Second Suez Canal, completion of Luchterduinen offshore wind park, and fast-tracked execution of Gemini wind park. The order portfolio totalled EUR 2.349 billion at year-end 2015 (2014: EUR 3.222 billion), down 27% on 2014.

High level of activity but more difficult market conditions

2015 was a year of major projects that made a significant contribution to our revenue and profit growth. Although Van Oord closed 2015 on a high note, it was also a year of sharp contrasts. Some worrisome economic trends have emerged, but also opportunities. With the low oil price causing capital expenditure to decrease in the oil and gas sector, our oil and gas activities have faced challenging circumstances.

Our Oil & Gas and Wind business units had fewer new projects than we had originally expected. The market for dredging projects was also negatively affected by the low oil price. As a result, our order portfolio fell by approximately one billion euros compared with 2014 to EUR 2.349 billion. On the other hand, the problems arising from climate change are creating opportunities for our Offshore Wind Projects business unit.

Offshore wind

The year 2015 was an extraordinary one for our wind division. September saw the successful start of the Luchterduinen project for our clients Eneco and Mitsubishi Corporation. This was the first project for our new installation vessel Aeolus. The installation of both the monopiles and the wind turbines went well. The Gemini project went exceedingly well in 2015. All the mono-piles were installed, as was much of the electrical infrastructure, including two Offshore High Voltage Stations. This was the very first project for our new cable-laying vessel Nexus, and its performance was excellent.

Pieter van Oord: ‘2015 was a busy year for the Offshore Wind Projects business unit, with activities for major projects such as Luchterduinen and Gemini reaching their peak. The Aeolus and the Nexus, our new vessels, performed very well. The market for large-scale offshore wind parks is growing rapidly. Offshore Wind Projects is a relatively new business unit and Van Oord has invested a considerable amount of capital in it in recent years. We often act as EPC contractor for offshore wind park projects. In other words, we assume responsibility for the engineering, procurement and construction of the wind park. In some cases, for example the construction of the Gemini wind park, we are also one of the shareholders.’

Denmark’s DONG Energy awarded Van Oord two contracts for offshore wind projects in 2015. In June, we received the contract to install the wind turbine foundations for the UK’s Burbo Bank Extension wind park. In October, we agreed to install and transport 87 foundations for the UK’s Walney Extension offshore wind park, again under contract to DONG Energy.

Prospects

Conditions in our markets will be challenging in 2016. The low prices of oil, iron ore, coal, copper and other commodities, and the economic and political problems in emerging countries like Brazil, China, and Russia will lead to a lower market volume and pressure on prices. The market for oil and gas, in particular, worsened rapidly in the past year and is not expected to improve in 2016.
The market conditions in the wind industry depend on the political support of governments in northwest Europe. The main ‘driver’ here is the problem of climate change and the correspondingly larger role being played by renewable energy. Concern about global warming, recently confirmed by the climate agreements in Paris, and the long-term aim of reducing our consumption of fossil fuels are leading to an increase in the use of wind energy, specifically in northwest Europe. With the price of electricity determined by subsidies, the wind energy sector depends on political decision making and therefore remains a high-risk proposition. We still believe that it offers many opportunities, however.
Pieter van Oord: ‘We operate in volatile markets. We expect market conditions to remain difficult in the coming years. Low oil prices and slower growth in markets that are important for us have put pressure on prices and reduced market volume. We are optimistic about the wind market for the next few years. We are confident about the future, thanks to the company’s strong financial position.’